Confessions of an Estate Planner

How did the Grantor of your Trust really intend the administration of your Trust to be carried out? Read on to find out …

Grantor’s Role in “Setting” Administrative Provisions of Trusts or Wills

Having been a Trust and Estates attorney for the past 12 years, I can say that we almost NEVER discuss administrative provisions in any detail with clients. Why? Clients simply don’t want to get into that level of detail 99% of the time. What happens when an estate planning client walks into our offices? Well, they know they need a Will or Trust, and they have some ideas about how they’d like funds to be distributed and to whom.

Grantor’s Role in Establishing Dispositive Provisions of Trusts or Wills

As estate planning lawyers, our job is to put the grantor’s desires on paper in the form of a structured legal document. We spend 90% of our time designing the “dispositive” provisions of the client’s Will, namely who gets what, how and when. We also take a great deal of time explaining Trust, Estate and Tax concepts to clients including various options they have. This might take multiple conversations with husband and wife to get the document “right.” Typically, the first few pages of a Will or Trust contain these “dispositive” provisions. These are the heart and soul of the document as far as the client is concerned. By the time the dispositive provisions are complete, the client is often completely fatigued by the planning process and ready to sign and be done. Don’t forget the estate planning client is also being presented with several other major decisions needed for Powers of Attorney, Health Care Proxies, Living Wills, HIPAA waivers and often more sophisticated planning techniques.

Grantor Fatigue

To say the client is fatigued by the end of those tax and legalese laden discussions is an understatement. So how do estate planners make time to go over the “backplate” of the document filled with “administration” provisions that govern Trustee or Executor powers and protections? Not well! This is simply the nature of the beast.

“Standard” Administrative Language

We ask our clients to review the administrative provisions or at least skim them and ask questions but very few do. Why? Again, the administrative provisions are long, detailed, and often in necessary technical terms that are completely unfamiliar and frustrating to the client. Also, the client trusts that the “standard” language is all in there so there is not much to discuss. This leads to the critical question of what is “standard” language for administration provisions and why. The language is geared to protect Executors and Trustees in carrying out the terms of the document. This is not entirely unreasonable. Would you personally agree to handle someone else’s money for decades at the highest standard of scrutiny and with a myriad of ever evolving rules and regulations without some personal protections? What are some of the key protections?

Executors and Trustees are compensated well from the Trust or Estate they administer. Commissions are often set by state statutes or published fee schedules in the case of a Trust company or bank. In order to cover minimum administration expenses, commissions are often disproportionately high for smaller Trusts or Estates.

Allowing Executors and Trustees to defend themselves from beneficiary challenges using trust funds for legal defense. The alternative is to require Executors or Trustees to defend themselves out of their own pockets but then almost no one would agree to act. If you were named to a board of directors, you would certainly obtain Directors and Officers liability insurance to protect you personally from an action against you in some corporate capacity. The same holds true for a Trust which is a separate legal entity that exposes you to unknown future liabilities such as beneficiaries or remaindermen who years later question your actions.

Exculpating Executors and Trustees from all but the worst acts of fraud and gross negligence. Again this provision assumes the best of Trustees and Executors. Why not? The client has hand picked the people he thinks will best take care of his heirs.

How Grantors Choose Trustees and Executors

Clients typically choose a trusted long term adviser, a bank with whom he or she has a long standing relationship, or a responsible family member with a financial background. They never imagined multiple bank mergers with personnel turnover or siblings who have stopped talking to one another. In short, beneficiaries should know that Grantors and their attorneys did not conspire to craft purposely restrictive administration provisions. Quite to the contrary; they probably spent little time discussing these “standard” provisions.

The Bottom Line: Flexible Interpretation

It is up to beneficiaries and their Trustees or Executors to openly discuss these realities and agree to deal with each other on more flexible, current terms. Very restrictive readings and interpretations of the administrative provisions will only drive beneficiaries and the fiduciaries further apart and in doing so cause tremendous angst for everyone involved.